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Citi Venture Capital International, the seed capital arm of the financial services giant, has made its first investment in Israel and is set to undertake leveraged buyouts in the country in a move away from its traditional growth strategy.

Citi has committed $20m (€14.8m) to the second fund from Israel's Aviv Venture Capital, which is targeting $100m and expects to close in the next two months.

The agreement between the two venture firms will not only give Citi access to Aviv’s local networks but according to Amir Guttman, Aviv’s founder and managing partner, Citi will potentially take majority stakes or support management buyouts of Aviv’s portfolio companies as they mature.

Guttman said there was no justification for Citi Venture Capital to have a small scale operation in Israel because the local buyout market is not large. He added the agreement is a “win-win” situation for both firms with Aviv gaining capital from a global name while offering Citi access to the Israeli buyout market.

Citi Venture Capital will compete against other European firms such as Apax Partners, which made the largest private equity investment in the country in 2005 according to figures from data provider Dealogic. Apax, alongside US private investment firm Saban Capital Group, acquired a controlling 30% stake in the country’s telecommunications provider Bezeq for $969m.

Private equity investment in Israel reached $1.9bn last year, a steady rise over the past five years from just $135m in 2002, according to Dealogic.